Op-eds

Games RBI Can Play: Op-Ed by Dean Chakravorti

We're just past the summer of the squabbling septuagenarians. Amartya Sen and Jagdish Bhagwati auditioned brilliantly for roles in the movie version of Professor Sen's earlier book, The Argumentative Indian. While the battle of the super-economists played out in the headlines, we almost missed the side story of India's economy heading for far-from-super status. Today, with the venerable professors back at their perches abroad, the world awakes to India's tryst with a new super-economist. Despite his relative youth, for now, there are few who would dare to argue against Raghuram Rajan, the new RBI governor. An entire nation waits with bated breath and asks, will Raghunomics save India?

The governor's table has been laid. The current account deficit is at $90 billion and foreign exchange reserves are at $275 billion. Add to this the $170 billion in short-term debt, which will have to be repaid if it cannot be rolled over. With a devaluing rupee, this is a recipe for an unappetising dish. In his homage to Will Durant's The Case for India last week, Rajan made a case for modest reforms and the mundane tasks that can get at the necessary — in his words — low-hanging fruit. He is too smart a man to not know that he will rather quickly have to reach higher, dig deeper and pivot faster. For this, he must draw from other reserves.